CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a 'BBB+' rating to W.R. Berkley Corporation's (Berkley) $350 million senior unsecured debt issuance due 2044. The rating is equivalent to Fitch's ratings on Berkley's existing senior unsecured notes.
On July 17, 2014, Fitch affirmed all of its ratings for Berkley with a Stable Outlook. A complete list of ratings follows at the end of this release.
KEY RATING DRIVERS
Fitch expects the company to use the debt issuance proceeds for general corporate purposes, including refinancing $200 million of 5.6% senior unsecured debt that matures in May 15, 2015.
Fitch views the debt issuance favorably overall as the new debt was issued at a more attractive rate with a long-dated maturity, resulting in an improved liquidity profile and eliminates near term refinancing risk. Fitch expects that the modest increase to pro forma financial leverage will be manageable and within both Fitch's expectations for the company and Fitch's sector credit factor guidelines for the rating category.
Berkley's pro forma debt-to-total capital ratio of 36% at June 30, 2014 will temporarily be above peer averages following the transaction; however, after the anticipated $200 million debt refinancing in early 2015, the ratio will reduce to 34% which conservatively assumes no growth in equity and no other debt repayment.
Fitch expects run-rate leverage to stay near current levels with earnings-based interest coverage remaining at approximately 6x.
Key rating triggers that could lead to a positive rating action include: 1) a sustained reduction in financial leverage to low-mid 20%'s; 2) continued profitable operating performance including a sustained combined ratio in the mid-90%'s and maintenance of aggregate loss reserve adequacy; and 3) maintenance of Fitch's Prism capital model score of 'Very Strong'.
Key rating triggers that could lead to a negative rating action include: 1) net leverage above 5.0x; 2) a material reduction in capitalization due to higher than expected losses in its investment portfolio, material adverse reserve development, or poor underwriting results; or 3) a sustained deterioration of operating performance on an absolute basis or relative to peers.
Additionally, a material increase in run rate debt to total capital ratio, or financial leverage ratio (debt to total capital excluding FAS 115), to 35% could lead Fitch to expand the notching between Berkley's IDR and debt rating, resulting in a one-notch downgrade to the senior and subordinated debt ratings.
Fitch has assigned the following rating:
W.R. Berkley Corporation
--$350 million 4.75% senior debt due 2044 'BBB+'.
Fitch currently rates Berkley as follows:
W. R. Berkley Corporation
--$200 million 5.6% senior debt due 2015 'BBB+';
--$150 million 6.15% senior debt due 2019 'BBB+';
--$300 million 7.375% senior debt due 2019 'BBB+';
--$300 million 5.375% senior debt due 2020 'BBB+';
--$76 million 8.7% senior debt due 2022 'BBB+';
--$350 million 4.625% senior debt due 2022 'BBB+';
--$250 million 6.25% senior debt due 2037 'BBB+';
--$350 million 5.625% junior subordinated debentures due 2053 'BBB-'.
Acadia Insurance Company
Admiral Insurance Company
Berkley National Insurance Co.
Berkley Regional Insurance Company
Berkley Regional Specialty Insurance Co.
Carolina Casualty Insurance Co.
Continental Western Insurance Co.
Firemen's Ins. Co. of Washington DC
Nautilus Insurance Company
Tri State Insurance Co. of Minnesota
Union Insurance Company
Union Standard Lloyds
Berkley Insurance Company
The Rating Outlook is Stable.
Additional information is available 'www.fitchratings.com'.
THE ISSUER DID NOT PARTICIPATE IN THE RATING PROCESS, OR PROVIDE ADDITIONAL INFORMATION, BEYOND THE ISSUER'S AVAILABLE PUBLIC DISCLOSURE.
Applicable Criteria & Related Research:
--'Insurance Rating Methodology' (Nov. 13, 2013);
--'Property/Casualty Insurance (U.S.) - Sector Credit Factors' (Aug. 3, 2012).
Applicable Criteria and Related Research:
Insurance Rating Methodology
Property/Casualty Insurance (U.S.) -- Sector Credit Factors